This was considered about 30 percent below market. Nevertheless, a lot of people doubted the sanity of the consortium, which is backed by a large Swedish insurance agency. After all, the tenant is Saab, and with its current references, the company would have a hard time renting an apartment in downtown Stockholm. Dagens Industri just found out why the consortium is quite happy with its distressed tenant: If Saab can’t pay the rent, the consortium gets the whole shebang for no extra money.

According to Saab’s press release, Saab signed a 15 year lease on the property. What was not in the press release was what Dagens Industri heard from what DI deems a reliable source. DI was told that the remaining 49.9 percent in the property are pledged as a security for the 15 year lease. First of all, Saab cannot sell off any of its remaining shares. Second, if Saab defaults on the lease, and bankruptcy would be a big case of a default, the rest of the property would go to the consortium to compensate for loss of lease payments, switching costs and sundry annoyances. Again, this is as DI heard it.

In case of a Saab bankruptcy, “the consortium would get all of the property for $ 40 million,” says DI, and explains: “In other words, the price per square meter would be cut in half.”

Dagens Industri tried to confirm that scenario. Saab’s PR department claimed ignorance as far as the lease arrangements are concerned. Jens Engwall, CEO of Hemfosa, did not return DI’s calls. “None of the other leading executives of Hemfosa want to confirm or deny the matter,” writes DI, and sounds pretty sure of itself.

DI recalls what Erik Paulsson, a key figure in the consortium, had said in early July: “If we cannot build cars, we can make car parts etc. … Spare parts alone would be huge.”

The faithful who worry about Saab going under because they won’t get parts for their old Saabs could look forward to this outcome. Parts production would be in the hands of well-financed people.

If Saab goes bankrupt, then what could the land be possibly worth. The local unemployment rate will rise consderably and it will be years before the land can be converted into something other than a car plant. In the short term especially, the land will be worth next to nothing. I’m not sure that the consortium which purchased the property would be happy at all to see Saab die.

If I had confidence in the continuing supply of parts, I might be tempted by SAAB’s upcoming retail closeout sales. But I’ve been there before, as owner of an aging Euro car with no parts available (see my screen name for a hint). I’d mike to see more informed discussion about what SAAB’s death will mean to current owners….

The engine on the 9-5 was made by scania. I believe the license was sold to a Chinese company. I wouldn’t be surprised if there were numerous unique pieces, even if made by OEMs. I think parts could be a big problem and current owners are not going to be able to unload their cars. Dealers will also suffer and some may go under. Overall, not good for anyone.

“First of all, Saab cannot sell off any of its remaining shares. Second, if Saab defaults on the lease, and bankruptcy would be a big case of a default, the rest of the property would go to the consortium to compensate for loss of lease payments, switching costs and sundry annoyances.”

Depending on the numbers, and the details, both of these clauses seem reasonable, and hardly opportunistic or onerous. After all, if an investor gives up full ownership of an asset i.l.o higher monthly income payments, or even a mortgage-like buy-back feature, then such a deal would need to be collateralized.

Early-on in the deal, when the risk of default would mean a potential disruption or termination in the planned 15-year monthly rent (and/or buy-back) income-stream this would be balanced against Saabs remaining equity in the Saab property.

Since we don’t know the details of the deal, we can also assume that there might be other steps in the ownership share that are time-driven and/or limited.

If there were a buy-back feature that contemplated Saab returning to health, it would not be unreasonable to assume that, say after year-7 of buyback, Saab would receive 1/2 of the investor’s share. If Saab had plentiful cash and wanted to advance the buy-back schedule, Saab could be expected to have to pay a premium over the planned cumulative payments, to accomplish this.

Unfortunately, given the current trajectory of affairs, and without some kind of significant game-changing event, it would seem that an eventual default award of Saab’s remaining equity in the property is becoming more, rather than less, likely.

He should have been clear that Saab (the car company) can’t sell off its shares in the entity that now owns the real estate (a separate company in which the real estate folks have invested.)

In some respects, this sounds like a fairly typical sale-leaseback deal. The price includes the first year’s worth of free rent, so there isn’t an issue with the automobile company being evicted over the short run.

Of course, what isn’t typical is that the seller-lessee (Saab the car company) is on its last legs. This is the sort of deal that indirectly makes it more difficult to emerge from a reorganization if the company were to attempt one, since it will have liquidated just about anything that could have otherwise been collateralized in support of the equivalent of DIP financing.

It’s obvious to anyone who isn’t a devoted fan that the company is in deep trouble. I haven’t followed all of the particulars of this drama, but without a well-funded white knight with suicidal tendencies to carry it, I just don’t see a happy ending here.